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April 23, 2013

PIMCO to Add 3 ETFs With Bill Gross as Active Manager

The PIMCO ETFs—Diversified Income, Low Duration and Real Return—will be similar to strategies of existing PIMCO fixed-income mutual funds

With PIMCO’s year-old Total Return exchange-traded fund now pulling in more investor dollars than its flagship fixed-income Total Return Fund, the investment management firm is understandably in a hurry to launch three more ETFs.

PIMCO, which exited a quiet period on Monday for the new funds, is adding bond king Bill Gross (left) as co-manager on all three of the actively traded ETFs, according to filings with the Securities and Exchange Commission.

The PIMCO ETFs—Diversified Income, Low Duration and Real Return—will be similar to the strategies of existing PIMCO fixed-income mutual funds, although a PIMCO spokesman told Barron’s that the funds were “not intended to be clones” of those mutual funds in an ETF vehicle. Tickers for the ETFs are not available.

Currently, PIMCO counts among its mutual funds the Diversified Income Fund (PDVAX), the Low-Duration Fund (PTLAX) and the Real Return Fund (PRTNX).

“Distinction without a difference? No, there’s a difference,” writes Brendan Conway for Barron’s. PIMCO's Total Return ETF (BOND) is up 10.5% in the last year, while its mutual-fund forebear, the PIMCO Total Return Fund (PTTRX), is up 7.6%. "No, it’s not a radical difference," he writes. "But the returns speak for themselves.”

A launch date has not yet been set. PIMCO currently has 20 ETFs, including seven actively managed ETFs.

The PIMCO Total Return Fund ETF, which Gross also manages, has about $5 billion in assets. About $263 million flowed into BOND in March versus $32 million for the $289 billion PTTRX mutual fund, Bloomberg reported on April 4.

“The outperformance underscores the rising influence of ETFs as investors seek faster ways to slip in and out of the bond market for an edge with returns dwindling after average annual gains of 6.3% in the past four years,” wrote Lisa Abramowicz for Bloomberg.

Just last May, Newport Beach, Calif.-based PIMCO announced that assets under management in the Total Return mutual fund had reached their all-time high of $258.7 billion, which in turn was a new record for any U.S. mutual fund.